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It is not uncommon to see companies perform well in the years after insiders buy shares. On the other hand, we'd be remiss not to mention that insider sales have been known to precede tough periods for a business. So we'll take a look at whether insiders have been buying or selling shares in Iterum Therapeutics plc (NASDAQ:ITRM).
What Is Insider Selling?
It is perfectly legal for company insiders, including board members, to buy and sell stock in a company. However, such insiders must disclose their trading activities, and not trade on inside information.
We would never suggest that investors should base their decisions solely on what the directors of a company have been doing. But equally, we would consider it foolish to ignore insider transactions altogether. For example, a Harvard University study found that 'insider purchases earn abnormal returns of more than 6% per year.'
The Last 12 Months Of Insider Transactions At Iterum Therapeutics
In the last twelve months, the biggest single purchase by an insider was when Director David Kelly bought US$63k worth of shares at a price of US$6.29 per share. That means that an insider was happy to buy shares at around the current price of US$6.55. While their view may have changed since the purchase was made, this does at least suggest they have had confidence in the company's future. We do always like to see insider buying, but it is worth noting if those purchases were made at well below today's share price, as the discount to value may have narrowed with the rising price. The good news for Iterum Therapeutics share holders is that insiders were buying at near the current price.
Over the last year, we can see that insiders have bought 14000 shares worth US$101k. In the last twelve months Iterum Therapeutics insiders were buying shares, but not selling. Their average price was about US$7.18. This is nice to see since it implies that insiders might see value around current prices. The chart below shows insider transactions (by individuals) over the last year. By clicking on the graph below, you can see the precise details of each insider transaction!
There are always plenty of stocks that insiders are buying. So if that suits your style you could check each stock one by one or you could take a look at this free list of companies. (Hint: insiders have been buying them).
Does Iterum Therapeutics Boast High Insider Ownership?
Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. I reckon it's a good sign if insiders own a significant number of shares in the company. Our data suggests Iterum Therapeutics insiders own 3.7% of the company, worth about US$3.4m. I generally like to see higher levels of ownership.
So What Do The Iterum Therapeutics Insider Transactions Indicate?
It doesn't really mean much that no insider has traded Iterum Therapeutics shares in the last quarter. On a brighter note, the transactions over the last year are encouraging. We'd like to see bigger individual holdings. However, we don't see anything to make us think Iterum Therapeutics insiders are doubting the company. Of course, the future is what matters most. So if you are interested in Iterum Therapeutics, you should check out this free report on analyst forecasts for the company.
But note: Iterum Therapeutics may not be the best stock to buy. So take a peek at this free list of interesting companies with high ROE and low debt.
For the purposes of this article, insiders are those individuals who report their transactions to the relevant regulatory body.
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If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.